India to conduct wind power auction next Tuesday

State-run Solar Energy Corp. of India will conduct the much-awaited auction to award 1GW of wind power contracts next Tuesday

India had an installed wind capacity of 32,279.77MW as of 31 March. Photo: Mint

New Delhi: India will conduct the much-awaited auction to award 1 gigawatt (GW) of wind power contracts next Tuesday.

The auction to be conducted by state-run Solar Energy Corp. of India (SECI) comes in the backdrop of India’s wind sector transitioning from a feed-in tariff regime to tariff-based competitive auctions.

While feed-in tariffs ensure a fixed price for wind power producers, the February auction conducted by SECI saw wind power tariffs in India following the solar route and hit a record low of Rs3.46 per kilowatt hour (kWh) for another 1GW tender.

This, in turn, caused disruptions with some states looking to renege on their offtake commitments for projects awarded at a comparatively higher tariff.

“The reverse auction will begin at 2pm on 19 September. We are expecting a good response,” said a person associated with the auction process, requesting anonymity.

Those qualified for the technical bid stage will be eligible for the financial bid stage. Once the financial bids are opened, a reverse auction process will be run to select the developers. In a reverse auction, the developers are chosen on the basis of the lowest prices offered.

SECI has received bids for three times the grid-linked capacity on offer, Mint reported on 14 July. In comparison, the February auction received 2.6 times the quantum of bids offered.

However, concerns remain about wind power sector.

Rating agency Crisil cautioned in May that under-construction projects, as part of the feed-in tariff regime, may be put up for auction by states to further lower tariffs.

Apart from the tariffs for executed power purchase agreements facing a downward tariff pressure from the states, the projects are also facing other impediments such as curtailment of wind power procurement, payment delays and no guidelines for state-level wind bids, according to the Wind Independent Power Producers Association (WIPPA).

According to the lobby group, these issues will create a new set of non-performing assets (NPAs) of Rs20,000 crore in India’s wind sector with the Indian banks stopping funding to these projects due to the concerns mentioned above.

The second volume of the Economic Survey 2016-17, released last month, said that NPAs in electricity generation accounted for around 5.9% of the total outstanding advances of Rs4.73 trillion.

“We have brought these issues in front of the government,” said WIPPA president Sunil Jain, who is also the chief executive officer of Hero Future Energies.

Also, Inox Group which was among the firms that bid the country’s lowest wind tariffs earlier this year now plans to exit the contract.

A SECI spokesperson couldn’t be immediately contacted.

India has a target of installing 175,000MW of renewable energy by 2022. Of this, 100,000MW is to be generated by solar projects and 60,000MW by wind projects. The country had an installed wind capacity of 32,279.77MW as of 31 March.